Labor and Employment 2015 Conference Investigations and Whistleblowing: How to Proceed When an Investigation Reveals Criminal Conduct or Other Improprieties Abigail Crouse Associate General Counsel RJ Zayed Partner Jillian Kornblatt Associate Beth Forsythe Associate University of St. Thomas St. Paul, Minnesota Dorsey & Whitney LLP Minneapolis, Minnesota (612) 492-6711 zayed.rj@dorsey.com Dorsey & Whitney LLP Minneapolis, Minnesota (612) 492-6156 kornblatt.jillian@dorsey.com Dorsey & Whitney LLP Minneapolis, Minnesota (612) 492-6747 forsythe.beth@dorsey.com 1. Speaker Biographies 2. PowerPoint Presentation 2015 Dorsey & Whitney LLP
Labor and Employment 2015 Conference Investigations and Whistleblowing: How to Proceed When an Investigation Reveals Criminal Conduct or Other Improprieties Speaker Bios Abigail Crouse is Associate General Counsel at the University of St. Thomas. Prior to joining the University, she practiced in the areas of employment and labor law and higher education law for 11 years at the law firm of Gray Plant Mooty. RJ Zayed is a Partner and Chair of Dorsey s Minneapolis Government Enforcement & Corporate Investigations group and Co-Chair of the IP Litigation group. Mr. Zayed has extensive experience in trial and appellate advocacy. He has tried over 50 cases to jury verdict in federal court as lead trial counsel in both civil and criminal cases, including patent infringement, contract, civil fraud, and criminal healthcare, wire, and mail fraud cases. Mr. Zayed has handled hundreds of bench trials, evidentiary hearings, and summary judgment arguments throughout the country, in both federal and state courts. He has submitted, and argued, over 30 civil and criminal appeals before the U.S. Courts of Appeals for the Seventh, Eighth, Ninth and Federal Circuits. Mr. Zayed has extensive experience in investigating, prosecuting, and defending complex white collar and government enforcement cases. While at United States Attorney's Office for the District of Minnesota, he led the investigation and prosecution of hundreds of criminal cases, including cases involving bank, computer, healthcare, mail, securities, tax and wire fraud, false statements and claims, bribery, economic espionage, environmental offenses (including the then two largest criminal environmental cases in state history), large multidefendant and multi-state conspiracies and conspiracies to defraud the United States, narcotics and violent crimes, organized crime, trafficking in counterfeit goods, and international offenses involving extradition. Since his return to private practice, Mr. Zayed has conducted hundreds of internal investigations and defended numerous cases, many involving allegations of bribery and corrupt practices, bank, computer, healthcare, mail, securities, tax and wire fraud, environmental offenses, false claims, adulterated and misbranded drugs and medical devices and off-label promotion, and economic espionage. Jillian Kornblatt is an Associate in Dorsey s Minneapolis Labor & Employment group, where she focuses her practice on employment litigation and advice. Ms. Kornblatt assists employers in investigating and responding to internal complaints, agency charges, and lawsuits based on allegations of discrimination, harassment, retaliation, breach of contract, conversion, wage and leave statute violations, and wrongful termination. Before practicing law, Ms. Kornblatt spent six years in human resources management. In these roles, she advised managers on employee relations, recruiting, compensation, benefits, performance appraisals, and organizational development issues. These experiences inform Ms. Kornblatt s advice practice, where she brings a practical approach focused on client goals.
Beth Forsythe is a member of Dorsey s Government Enforcement & Corporate Investigations group. In her white collar practice, Ms. Forsyteh represents companies and individuals who are under investigation by federal and state authorities for securities fraud, health care fraud, mortgage fraud, public corruption, and Foreign Corrupt Practices Act ("FCPA") violations. She also assists companies that have identified potential violations of law by planning and conducting efficient but thorough internal investigations. Ms. Forsyteh routinely provides anticorruption/fcpa due diligence and compliance advisory services, including program development, board presentations, and employee training. Drawing on her financial background as a licensed certified public accountant (inactive status), Ms. Forsyteh represents parties in civil and criminal matters that involve complex accounting, securities, and other financial issues. 2
Investigations and Whistleblowing: How to Proceed When an Investigation Reveals Criminal Conduct or Other Improprieties Abigail Crouse Associate General Counsel, University of St. Thomas Beth Forsythe Jillian Kornblatt RJ Zayed Dorsey & Whitney LLP 1 Agenda Examples of Criminal or Improper Conduct Uncovered by HR Investigations To Self-Report, or Not to Self-Report Benefits Whistleblower Considerations Risks Timing Investigations that Lead to Executives or Board Informing Employees of Investigation 2 1
HR Investigations May Lead to Discovery of Criminal Conduct or Other Improprieties Child Pornography Bribery of Foreign Officials Identity Theft 3 Example: Child Pornography There have been allegations that one employee is harassing another employee. Review of the alleged harasser s work emails does not uncover any evidence of harassment but does reveal several subscriptions to child pornography websites. What do you do? 4 2
Example: Bribery of Foreign Officials In a truck manufacturing company that does business throughout North America, investigation into an employee s possible violations of the company s expense reimbursement policy uncovers emails indicating that at least one employee has been paying exorbitant commissions to a broker in Mexico who helped the employee obtain a lucrative government contract to purchase fleets of trucks for the Mexican government. You have heard of the FCPA and are concerned that this may be bribery. What do you do? 5 Example: Identity Theft An anonymous tip that one employee may be undocumented and working illegally results in a discovery that dozens of employees in locations throughout the United States are working under other individuals Social Security numbers. Many employees have access to clients personal information, including clients Social Security numbers. You are concerned that this may indicate mass identity theft of client data. What do you do? 6 3
Self-Reporting: When and How Should You Reach Out to Government Authorities with the Information Uncovered? Benefits of Self-Reporting Risks of Self-Reporting Other Considerations Timing 7 Benefits of Self-Reporting Cooperation Credit FCPA enforcement officials uniformly cite voluntary self-disclosure as one of the most critical elements of the government s decision to award cooperation credit More likely now than ever before that the issue will come to the government s attention anyway Whistleblower incentives High Profile FCPA cases Parallel enforcement in other countries 8 4
Minnesota Whistleblower Act Defining Good Faith Pre-2013 Amendments Good faith originally undefined in statute Courts interpreted good faith as requiring report be made for the purpose of exposing an illegality Post-2013 Amendments Good faith now defined as conduct that does not violate Section 181.932, subdivision 3 Section 181.932, subdivision 3 provides: This section does not permit an employee to make statements or disclosures knowing that they are false or in reckless disregard of the truth 9 Minnesota Whistleblower Act Defining Good Faith What is the effect of good faith definition on whistleblower claims? Unclear To date, no Minnesota court has interpreted the amended good faith definition and its effect on claims brought under the Minnesota Whistleblower Act 10 5
Minnesota Whistleblower Act: Defining Report and Penalize Report Now defined as a verbal, written, or electronic communication by an employee about an actual, suspected, or planned violation of a statute, regulation, or common law, whether committed by an employer or third party Penalize Now defined as conduct that might dissuade a reasonable employee from making or supporting a report, including post-termination conduct by an employer or conduct by an employer for the benefit for a third party 11 Minnesota Whistleblower Act: Reporting Planned Violations Pre-2013 Amendments Minnesota Whistleblower Act only protected reports of violations or suspected violations of law Post-2013 Amendments Minnesota Whistleblower Act now also protects reports concerning a planned violation of law 12 6
Minnesota Whistleblower Act: Reporting Common Law Violations Pre-2013 Amendments A report had to implicate a federal or state law or a rule adopted pursuant to law Post-2013 Amendments A report may now also be based on a violation of common law 13 Statute of Limitations for Minnesota Whistleblower Act Claims Previously Courts held that Minnesota Whistleblower Act claims were subject to a two-year statute of limitations Now Recent decision by Minnesota Court of Appeals overturned prior case law and held that Minnesota Whistleblower Act claims are subject to a six-year statute of limitations 14 7
Risks of Self-Reporting Unnecessary costs Negative publicity Underlying facts may not warrant enforcement action 15 Self-Reporting: Additional Considerations Maximum benefit from self-reporting at earliest stage of investigation even before all facts are known No guarantee that self-reporting will lead to leniency, non-prosecution, or reduced fines State of compliance program 16 8
Self-Reporting: Timing Too Early Facts and allegations may not be fully developed Too Late The government expects voluntary disclosure soon after issue comes to light Additional PR problems if it looks like company is trying to hide the infraction Case Example: Ralph Lauren Case Non-prosecution agreement largely as a result of timely selfreporting only two weeks after issue discovered 17 What To Do When the Investigation Leads to Company Executives or Board Members Independence is key Special litigation committees Leaves of absence Power struggles 18 9
How Much Information to Give Employees Employee Warnings Document Non-Destruction Memorandum Upjohn Warnings 19 Employee Warnings All Employees Relevant employees should be informed of the existence of the investigation They should be told that they may be approached by investigators They should be informed that: It is their choice whether to speak to investigator or not They may consult with corporate counsel Employees must provide truthful information to investigator and corporate counsel 20 10
Document Non-Destruction Memorandum All employees who may have information relevant to the investigation should be given a document nondestruction memorandum early in the investigation Purpose: Communicates seriousness of investigation Educates employees that destroying records will not help them or the company Creates record to provide to future government investigator or civil litigant showing that proper steps were taken 21 Upjohn Warnings An Upjohn warning should be given to each employee prior to being interviewed Allows companies to conduct internal investigations through interviewing employees, while also keeping these communications confidential Failure to give warning: attorney may be accused of representing two parties with conflicting interests without consent 22 11
Sample Upjohn Warning I am a lawyer for The Company. I represent only The Company. I do not represent you personally. I am conducting this interview to gather facts in order to provide legal advice for The Company. This interview is part of an investigation to determine the facts and circumstances of X in order to advise The Company how best to proceed. Your communications with me are protected by the attorney-client privilege. But the attorney-client privilege belongs solely to The Company, not you. That means The Company alone may decide to waive the privilege and disclose this discussion to such third parties as federal or state agencies, at its sole discretion, and without notifying you. In order for this discussion to be subject to the privilege, it must be kept in confidence. In other words, with the exception of your own attorney, you may not disclose the substance of this interview to any third party, including other employees or anyone outside of The Company. You may discuss the facts of what happened but you may not discuss this conversation. Do you have any questions? Are you willing to proceed? 23 Questions? 24 12